New Mexico Gov. Bill Richardson, D, knows who his friends are. In 2003, speaking before the Interstate Oil and Gas Compact Commission, he told the assembled governors and industry bigwigs that they built his state’s budget surplus. And since then, New Mexico’s coffers have continued to fill: Last year, the State Land Office collected a record $32.7 million in lease sales and $236.3 million in royalties from oil and gas companies alone (HCN, 6/21/04: Oil money rules in the West's mini-Middle East).

But that cash can come with controversy. Seven years ago, the U.S. Bureau of Land Management closed Otero Mesa in southern New Mexico to drilling and began updating its management plan. While the agency suspended existing oil and gas leases, an alliance of environmentalists, ranchers and property-rights advocates sought to keep the mesa off-limits to development (HCN, 3/29/04: New Mexicans take a stand against oil and gas).

And it was in that dusty stretch of desert that Richardson drew a line, and tried to halt development on federal property that oil and gas companies are itching to explore. Now, the state is locked in a fight with the federal government over the fate of 2.1 million acres of Chihuahuan desert — and over who writes the rules for oil and gas development on public lands.

"We’re working for a balance for the future," says Joanna Prukop, Cabinet Secretary of the state’s energy, mineral and natural resources department. "We believe in responsible oil and gas development, but (the governor) has to consider all the resources in the area."

Since entering office in 2003, Richardson has worked hard to curb development on Otero. When the BLM released its final plan to allow about 35 gas wells and 70 oil wells on the mesa, Richardson ordered the state’s Oil Conservation Division to prohibit the use of wastewater pits and to restrict the re-injection of polluted water into the ground. He also ordered the state engineer’s office to strictly regulate groundwater pumping permits, and the state’s natural resources agencies to implement "special protections" for plants and wildlife.

Richardson also began a "consistency review" of the BLM’s plan. Under federal law, the BLM must balance state and national interests; as the state’s chief executive, the governor determines if the federal plan is consistent with state laws.

Released in March 2004, his review found that the federal plan violated many state laws, including New Mexico’s Wildlife Conservation Act and the state water plan. According to Richardson, the BLM also circumvented the National Environmental Policy Act by changing its "preferred alternative" between the draft and final plans without public comment. Prukop says the BLM has no idea how the proposed development will affect everything from groundwater to bighorn sheep: "It’s dazzling to go through the different sections (of the BLM’s plan) and to read the number of times they say they didn’t have enough information or didn’t have the time and the money to do a study."

The governor proposed putting 1.5 million acres off-limits to drilling altogether or under strong protections, and setting aside 640,000 acres as a national conservation area. When the BLM rejected those recommendations, Richardson shot back with an appeal, writing that "BLM has primarily focused on how its (plan) complies with its own policies … . The BLM has an affirmative obligation to resolve inconsistencies with state interests and to adopt my recommendations."

But the federal government has been equally steadfast, and in January, the BLM opened all but 124,000 acres of Otero to energy development. According to the decision, the governor’s recommendations are "not fully consistent" with President Bush’s 2001 and 2003 executive orders directing agencies to expedite energy-related projects on public lands. Richardson’s plan was also inconsistent with the BLM "fluid mineral leasing" policy, revised in May 2001, which calls for the use of "the least restrictive stipulation that effectively accomplishes the resource management objectives."

State BLM director Linda Rundell calls the agency’s Otero decision "the most restrictive that has ever come out with respect to oil and gas exploration and development on public lands." Normally, energy companies nominate lands to lease; on Otero, the agency will decide which parcels are available. "We’re going to control what happens," she says. "If they come up with a dry hole, we’ll limit leasing. If it’s not a dry hole, there will be more interest and we’ll be more careful." But between the "notoriety of the place" and the BLM’s new stipulations and reclamation standards, Rundell jokes that industry representatives have said "there’s no way we’re going to go out there." Drilling within the 150,000 acres already leased is expected to begin soon, and new leases will go up for sale this year.

The state, meanwhile, is preparing to haul the BLM into court, and the New Mexico Wilderness Alliance is rallying a national campaign to protect the mesa. "This is not a fight we’re going to walk away from," says Stephen Capra, the group’s director. "And the strongest tool in our toolbox is the governor of this state, and the will of the vast majority of New Mexicans."

The author is HCN assistant editor.

This story was funded by a grant from the McCune Charitable Foundation.

The following is the text of letter from BLM Director Kathleen Clarke to Governor Bill Richardson responding to the Governor's appeal of the consistency review. www.blm.gov/nhp/spotlight/otero_mesa_decision/otero_mesa_letter.pdf

Environmental Working Group’s webpage on Otero Mesa and oil and gas leases www.ewg.org/oil_and_gas/part7.php